Office Depot will issue 2.69 new shares for each outstanding OfficeMax common share, the companies said Wednesday in a statement. Based on Office Depot's closing price Tuesday, that values OfficeMax at $13.50 a share, 26 percent higher than it closed at Feb. 15, before reports the companies were in talks to combine.

The merged company may accelerate the closing or selling of hundreds of stores after Starboard Value, an activist fund that became Office Depot's largest shareholder in September, pushed for expense reductions.

"Consolidation is needed in an overstored and secularly declining industry," wrote Greg Melich, an analyst at International Strategy & Investment Group in New York. "We see two fundamental shifts that continue to hurt demand: digitization of the workplace (that is reducing the demand for traditional office products) and a shift to e-commerce."

Starboard chief executive Jeffrey Smith pushed for changes at Office Depot in a letter to Office Depot CEO Neil Austrian on Sept. 17 arguing that the retailer's "poor operating performance" has hurt the stock. Smith, whose firm owns more than 14 percent of the chain, recommended smaller stores carrying fewer items. It also should cut general expenses and lower advertising costs, he said.

Both chains have been closing locations, and that trend would accelerate with a merger as about 50 percent of their store territories overlap, Daniel Binder, an analyst for Jefferies & Co. in New York, wrote in a note to clients.

"It makes sense to close a lot of stores and fulfill orders out of facilities that specialize in packing and delivering, using less-expensive real estate," said Erik Gordon, a business and law professor at the University of Michigan in Ann Arbor. "It's become a cost-driven, commodity business. Everyone sells Bic pens and Swingline staplers. The competitive advantage is to sell them cheaper and get them delivered quickly."

The deal may be challenged by the Federal Trade Commission, according to David Balto, an antitrust attorney in Washington who was the FTC's director of policy for six years ending in 2001. He worked on the FTC's lawsuit that stopped Staples from acquiring Office Depot in 1997.

Balto said reducing the number of big-box office retailers from three to two may be viewed as anticompetitive, just as it was back then. In addition, the Obama administration has been tough about enforcing antitrust laws, he said.

"They are facing a stiff wind," Balto said.

The industry has "dramatically changed" since 1997 with consumers having more choices since the emergence of online competitors such as Amazon.com Inc., Binder said. It is these competitors and the digitization of the office that can no longer support three national office-supply chains, he said.

As small businesses, the main customer of all three chains, used fewer pens and filing cabinets, the companies broadened their selection into technology products such as software, tablets and smartphones.

By the numbers

$24B

Revenue last year for Staples, the industry leader

$18B

Annual revenue of combined Office Depot and OfficeMax

2,295

Number of Staples locations worldwide as of Jan. 28, 2012

1,675

Office Depot global locations

900

OfficeMax stores in U.S. and Mexico

600

Number of stores expected to be closed or sold after the merger

$600M

Amount in annual savings expected from the merger within three years

Who's the CEO?

The new company's board will include an equal number of directors designated by Office Depot and OfficeMax, the companies said. The board will conduct a search for a chief executive officer. Both incumbent CEOs, Neil Austrian at Office Depot and OfficeMax's Ravi Saligram, will be considered.

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